Reconfiguring the Business Israel Gat Senior Consultant Cutter Consortium

Agenda Part I: A New Paradigm Part II: The Agile Software Opportunity Part III: A Chasm Between Executive and Employees Part III: A Chasm Between R&D and the Business

Part I: A New Paradigm

Part II: The Agile Software Opportunity

Part III: A Chasm Between Executive and Employees

Part III: A Chasm Between R&D and the Business

The Classical Techno-Economic Paradigm a la Perez A sequence of events characterizes each of the techno-economic cycles : Major technological innovation introduces new infrastructure The new infrastructure disrupts both industry and commerce (and very possibly society) In good time the new infrastructure becomes a stabilizing force The technology gets understood and harnessed Confidence builds in the new order that evolves around the technology Inertia becomes the legacy of successful innovation

A sequence of events characterizes each of the techno-economic cycles :

Major technological innovation introduces new infrastructure

The new infrastructure disrupts both industry and commerce (and very possibly society)

In good time the new infrastructure becomes a stabilizing force

The technology gets understood and harnessed

Confidence builds in the new order that evolves around the technology

Inertia becomes the legacy of successful innovation

Five Successive Technological Revolutions Source: Carlota Perez, Technological Revolutions and Financial Capital Revolution Name Country Initiation Year First The ‘Industrial Revolution’ Britain Arkwright’s mill 1771 Second Age of Steam and Railway Britain The Liverpool-Manchester railway 1829 Third Age of Steel, Electricity and Heavy Engineering USA and Germany The Carnegie Bessmer steel plant 1875 Fourth Age of Oil, the Automobile and Mass Production USA Ford Model-T 1908 Fifth Information/ Tele-communication USA The Intel Microprocessor 1971

Revisionist Techno-Economic Theory a la Hagel, Brown and Davison The historical pattern itself has been disrupted: Disruption followed by stabilization is no more the case The pace of change in Information, Telecommunication and software is exponential Uncertainty and instability are pervasive Sustained periods of prolonged equilibrium are unlikely Both business and social systems need to adapt on an on-going basis to turbulent changes But, a company can now punch “above his weight class” through the global digital infrastructure (*) Hagel, Brown and Davison, Shaping Strategy in a World of Constant Disruption, Harvard Business Review, October 2008

The historical pattern itself has been disrupted:

Disruption followed by stabilization is no more the case

The pace of change in Information, Telecommunication and software is exponential

Uncertainty and instability are pervasive

Sustained periods of prolonged equilibrium are unlikely

Both business and social systems need to adapt on an on-going basis to turbulent changes

But, a company can now punch “above his weight class” through the global digital infrastructure

(*) Hagel, Brown and Davison, Shaping Strategy in a World of Constant Disruption, Harvard Business Review, October 2008

Agenda Part I: A New Paradigm Part II: The Agile Software Opportunity Part III: A Chasm Between Executive and Employees Part IV: A Chasm Between R&D and the Business

Part I: A New Paradigm

Part II: The Agile Software Opportunity

Part III: A Chasm Between Executive and Employees

Part IV: A Chasm Between R&D and the Business

Role of Software in Your Strategy As software is malleable, it can respond exceptionally well to the exponential pace/change in the new paradigm: As an end to itself As embedded software As part of a business process/initiative The higher the embedded software content in a product is, the more malleable the whole product becomes: Example: cellular phones Chunking through Agile methods facilitates quick changes on a granular level at any phase of the product life cycle

As software is malleable, it can respond exceptionally well to the exponential pace/change in the new paradigm:

As an end to itself

As embedded software

As part of a business process/initiative

The higher the embedded software content in a product is, the more malleable the whole product becomes:

Example: cellular phones

Chunking through Agile methods facilitates quick changes on a granular level at any phase of the product life cycle

Enormity of the Software Opportunity Software is becoming pervasive: 3 billion mobile devices nowadays touch the Internet [Joshua-Michele Ross, The Rise of the Social Nervous System ] Software is quickly becoming the biggest component in many products in which it is embedded Each of the aforementioned 3 billion mobile devices probably contains about 1 million lines of code Alignment of velocities: IT Operations is becoming ultra-fast Flickr updates its servers every 30 minutes [Kent Beck, Trends in Agile Development ] IMVU updates its servers every 9 minutes [InfoQ: Beyond Continuous Integration: Continuous Deployment ] © Copyright 2009 Israel Gat

Software is becoming pervasive:

3 billion mobile devices nowadays touch the Internet

[Joshua-Michele Ross, The Rise of the Social Nervous System ]

Software is quickly becoming the biggest component in many products in which it is embedded

Each of the aforementioned 3 billion mobile devices probably contains about 1 million lines of code

Alignment of velocities: IT Operations is becoming ultra-fast

Flickr updates its servers every 30 minutes

[Kent Beck, Trends in Agile Development ]

IMVU updates its servers every 9 minutes

[InfoQ: Beyond Continuous Integration: Continuous Deployment ]

Relentless Software Innovation Through Agile Methods Many kinds of innovation Disruptive innovation Product innovation Platform innovation Value engineering innovation Process innovation Business model innovation Line extension innovation Enhancement innovation Various others Innovation by experimentation Learning what does not work is as important as learning what works Today’s low cost of experimentation enables finding by trying For Agile, the bi-weekly Agile iterations provides a “firewall” that caps investment

Many kinds of innovation

Disruptive innovation

Product innovation

Platform innovation

Value engineering innovation

Process innovation

Business model innovation

Line extension innovation

Enhancement innovation

Various others

Innovation by experimentation

Learning what does not work is as important as learning what works

Today’s low cost of experimentation enables finding by trying

For Agile, the bi-weekly Agile iterations provides a “firewall” that caps investment

Two Chasms You Must Cross Six simultaneous dimensions of change: The Software evolves The Architecture evolves The process evolves The organization evolves The deployment modus evolves The customer and his problem evolve Some of these dimensions are subject to strong inertia: Routine School of thought Vested interests Difference in the rhythm of change leads to two chasms: Between Executive and Employees Between R&D and the Business

Six simultaneous dimensions of change:

The Software evolves

The Architecture evolves

The process evolves

The organization evolves

The deployment modus evolves

The customer and his problem evolve

Some of these dimensions are subject to strong inertia:

Routine

School of thought

Vested interests

Difference in the rhythm of change leads to two chasms:

Between Executive and Employees

Between R&D and the Business

Agenda Part I: A New Paradigm Part II: The Agile Software Opportunity Part III: A Chasm Between Executive and Employees Part IV: A Chasm Between R&D and the Business

Part I: A New Paradigm

Part II: The Agile Software Opportunity

Part III: A Chasm Between Executive and Employees

Part IV: A Chasm Between R&D and the Business

A Social Contract for Agile “ Team, my overarching organizational objective is to preserve our team and its institutional knowledge for our corporation and its customers for years to come We will achieve this goal by enhancing our software engineering prowess to the level that the resultant benefits will outweigh the repercussions of the current financial crisis The state of the Agile art should enable us to attain hyper-productivity In the event that we fail to accomplish hyper-productivity and our assignments fade away, you will find the Agile skills you developed much in demand in the market Whether you will or will not be with the company in the future, I acknowledge your need to develop professionally as an Agile practitioner and commit to invest in your education/training” (*) Loose definition - social contract: "Implied agreements by which people form a community and maintain relatively stable system of institutions, pattern of interactions and customs."

“ Team, my overarching organizational objective is to preserve our team and its institutional knowledge for our corporation and its customers for years to come

We will achieve this goal by enhancing our software engineering prowess to the level that the resultant benefits will outweigh the repercussions of the current financial crisis

The state of the Agile art should enable us to attain hyper-productivity

In the event that we fail to accomplish hyper-productivity and our assignments fade away, you will find the Agile skills you developed much in demand in the market

Whether you will or will not be with the company in the future, I acknowledge your need to develop professionally as an Agile practitioner and commit to invest in your education/training”

(*) Loose definition - social contract: "Implied agreements by which people form a community and maintain relatively stable system of institutions, pattern of interactions and customs."

Qualitative Assessment of Success “ Working with the agile teams at BMC those last two years were some of the most rewarding in my career because of the sense of purpose, direction and camaraderie that the process instilled in everyone.” [R&D Architect] “ If we used waterfall on BPM, we would still be in development. We would likely be cutting features right and left to try to bring the date back in. Changes requested along the way by the solutions teams would have been pushed back on rather than embraced. ” [R&D Director] “ The change you brought to BMC with Agile is the single largest change to the development model that I have ever witnessed in my almost 20 years at BMC." [R&D Director]

“ Working with the agile teams at BMC those last two years were some of the most rewarding in my career because of the sense of purpose, direction and camaraderie that the process instilled in everyone.”

[R&D Architect]

“ If we used waterfall on BPM, we would still be in development. We would likely be cutting features right and left to try to bring the date back in. Changes requested along the way by the solutions teams would have been pushed back on rather than embraced. ”

[R&D Director]

“ The change you brought to BMC with Agile is the single largest change to the development model that I have ever witnessed in my almost 20 years at BMC."

[R&D Director]

Quantitative Measurement of Productivity by QSMA © Copyright 1/11/2009 BMC Software, Inc. 0 2 4 6 8 10 12 14 16 18 20 22 24 Business Information Command and Control Process Control Scientific System Telecommunications Engineering Avionics Microcode Real Time Real Time 28 26

Agenda Part I: A New Paradigm Part II: The Agile Software Opportunity Part III: A Chasm Between Executive and Employees Part IV: A Chasm Between R&D and the Business

Part I: A New Paradigm

Part II: The Agile Software Opportunity

Part III: A Chasm Between Executive and Employees

Part IV: A Chasm Between R&D and the Business

A Chasm of Biblical Proportions

Agile lessons for business innovation Imperative need for continuous innovation Neither internal nor external innovation begin with understanding of customer Start with stories & design goals, not an elaborate business plan “ Agile” as a set of methodologies allows non-technical innovators to access the way techies build “stuff” Iteratively discover the customer and define the product in tandem Contained cost of experimentation The Lean Startup Steve Blank and Eric Ries

Imperative need for continuous innovation

Neither internal nor external innovation begin with understanding of customer

Start with stories & design goals, not an elaborate business plan

“ Agile” as a set of methodologies allows non-technical innovators to access the way techies build “stuff”

Iteratively discover the customer and define the product in tandem

Contained cost of experimentation

A Modus for our Time Classic model: Two propeller heads with a neat new toy approach VC for money and business maturity New model: business person has entrepreneurial idea that happens to be expressed via a Web application The new tech entrepreneur/intrepreneur is less likely to be able to build their own technology Agile is the only development methodology that can fulfill the needs of the prevailing turbulent environment

Classic model: Two propeller heads with a neat new toy approach VC for money and business maturity

New model: business person has entrepreneurial idea that happens to be expressed via a Web application

The new tech entrepreneur/intrepreneur is less likely to be able to build their own technology

Agile is the only development methodology that can fulfill the needs of the prevailing turbulent environment

Q&A ?

Q&A

?

Closing thoughts: A New Venture Model Most innovative and successful businesses are holistic re-combinations of proven patterns in a novel way Starting with a cool widget makes the outcome essentially random Discontinuous innovation puts the business at risk Instead: Start with an idea to create value in a market & a business champion Start with business design conversations Marry to development resources, bring them into the conversation Iterate through the process of building the parts of the business and figuring out how they fit together. Repeat at portfolio level: build an self-reinforcing ecosystem, not a one-off firm/project

Most innovative and successful businesses are holistic re-combinations of proven patterns in a novel way

Starting with a cool widget makes the outcome essentially random

Discontinuous innovation puts the business at risk

Instead:

Start with an idea to create value in a market & a business champion

Start with business design conversations

Marry to development resources, bring them into the conversation

Iterate through the process of building the parts of the business and figuring out how they fit together.

Repeat at portfolio level: build an self-reinforcing ecosystem, not a one-off firm/project

Contact Information Israel Gat Cutter Consortium http://theagileexecutive.com/ 512-826-3210 [email_address]

Israel Gat

Cutter Consortium

http://theagileexecutive.com/

512-826-3210

[email_address]